Amazon To Shake Up Oz Cloud: Analysts

The launch of Amazon Web Service (AWS) locally, although via third party suppliers offers a "compelling service," says Matt Oostveen, chief of research for IDC ANZ.

"Larger cloud companies tip toe around the fact data is not located within Oz and you can never negate that."

AWS is a unique service as its data centres are located within Australia, a "smart play" by the web giant as it will force competiting services to invest in local [data] centres and has certainly upped the ante, Oostveen told SmartHouse.

"An in-country presence is quite compelling for the end user."

"Its hard to discuss cloud without reference to governance, something which has been a major frustration in Australia...its hard to underestimate the importance of where the information is located."

The low latency associated with a local service is also another major pull to ASW which offers 20 services to Aussie customers including Elastic computer Cloud (EC2) including Virtual Private Cloud, Storage Gateway, RDS and SQS.

"AWS customers in Australia can now enjoy fast, low-latency access to the suite of AWS infrastructure services," Amazon announced last week and has local offices based in Sydney, Melbourne, and Perth.

Amazon now has a "major competitive advantage," says Oostveen, and the service allows organisations to streamline data instead of multiple cloud services.

Although it is charging a premium for the luxury of local cloud storage, customers will be willing to pay the premium, he believes.

"CIO's will now be able to shake hands with one organisation," noting "consolidation of IT is now a major objective of CIO's in 2013."

And that's not to mention the instantly recognisable brand name, Amazon - another differentiator in an increasingly crowded cloud computing market, says Oostveen, referring to "the power of Amazon market machine and brand presence around cloud" as another major pull factor.

And although cloud services are "growing rapidly," it's still a small proportion of total IT spent, around 7%, although this may grow to 9% in a few years time, the IDC analyst predicts.

So is Amazon's entry into the cloud market going to be a killer for smaller players locally?

"A lot of cloud providers may go out of business in the next 36 months - not a direct result of Amazon though, its a reflection of the sheer number of cloud providers out there," Oostveen predicts.

"But Amazon won't be one of them."

Analysts Gartner also agree, predicting cloud usage will rise following Amazon entry with a local service.

"One of the inhibitors preventing enterprise users from buying public cloud or IaaS services more aggressively has been location of data outside Australia," says Rolf Jester, Gartner's Vice-President, IT Services Research.

"That's why several other providers, including IT service providers and outsourcers have been announcing offerings here based on data centres located in-country."

Demand for cloud/Infrastructure as a IaaS services is "real", he told SmartHouse.

"Here at Symposium on the Gold Coast I have been speaking to IT executives from major enterprises including banks who want real cloud offerings, with real usage-based pricing, but are not necessarily yet finding the offerings they want from the providers on the market."

Aggregate expenditure on IaaS compute services in Australia will be $186 million this year alone and although it's small compared to traditional outsourcing, it will be the equivalent to about a tenth of the total infrastructure outsourcing market by 2016.